2015 has been dubbed the year of the "Goldilocks"
economy for New Zealand – not too hot, not too cold. Reserve
Bank of New Zealand (RBNZ) forecasts are for annual GDP
growth of 3% and falling unemployment supported by continued low
inflation (if not a period of temporary deflation triggered by
collapsing oil prices).
Domestic demand has maintained its momentum and, importantly,
appears to be sustainable in light of continued increases in the
economy's productive capacity. This lift has been attributed to
two factors – labour force growth (both in size and
participation rates) and increased business investment. The
investment share of real GDP has risen from 21% in 2011 to 24% in
Business and consumer confidence remains high relative to
historical norms. The latest NZIER Quarterly Survey of Business
Opinion recorded a 21% net optimism level, while the ANZ-Roy Morgan
Consumer Confidence Index was at 128.9 in January 2015, well above
the decade average of 119 and up from around 110 in 2012.
Most of the risks are international.
Deflation and ongoing economic malaise in Europe may lead to a
slowdown in demand for export products. Volatility in commodity
prices also presents some uncertainties. International dairy prices
fell 52% last year, although there are now early signs of a
recovery. New Zealand is also vulnerable to a slowing in the
Chinese economy, China now contending with Australia as our largest
trading partner. On the other side of the ledger, the RBNZ
estimates that the sharp drop in oil prices (down around 58% since
the end of June 2014) will boost GDP by around 1%.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
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